I am Campaigns and Networking Coordinator at Baby Milk Action, which monitors the baby food industry. Our aim is to protect breastfeeding and babies fed on formula from practices that put profits before health. This is a daily look behind the scenes of the work of Baby Milk Action, including the boycott of Nestlé (the worst of the baby food companies), which we promote in the UK. See the Baby Milk Action website if you are unfamiliar with our work.

Mr. Brabeck’s successor as Chief Executive Officer (CEO) is due to be announced on 20 September 2007, to be confirmed at the next shareholder meeting on 10 April 2008 in Lausanne, Switzerland. You have about 11 months to sort out a share so you can attend the meeting. More on how to do that shortly.

There is a lot more I could have written about the shareholder meeting. Indeed, there is a lot more Mr. Brabeck could have said. In fact, there is a lot more he should have said to keep shareholders fully informed. And some are calling for better disclosure by corporations. Nestlé is notoriously poor when it comes to accountability. In the Global Accountability Report 2006 it received a little over 50% in just two of the four categories evaluated. One of these ‘positive rankings’ - as Nestlé portrays its half marks - was partly due to having an information disclosure policy. Nestlé glosses over the fact that the quality of that policy was evaluated at 0% (yes, zero %).

In the UK companies are now required to report to shareholders on their social and environmental impact as well as financial performance. This was resisted vigorously by business leaders and the regulations are weak (there are no reporting standards and no penalties for producing untrue reports). There are also calls for corporations to reveal to shareholders any possible liabilities.

Let us hope Mr. Brabeck’s successor as CEO will embrace some of these good governance principles. As that is a slim hope, let us continue to work for improved regulation of corporations.

In a fantasy world, I can imagine a Nestlé CEO including some key facts in his (unlikely to be ‘her’ as there is not a single female member of the executive board) statement. Something like this if it had been this year:

---What Nestlé's CEO could have said in a more honest statement

“Your company has just completed an excellent year. Excellent, first and foremost, in terms of the results achieved: sales topped the 98 billion Swiss francs mark, net profit climbed to 9.2 billion Swiss francs and – for the first time in the Company’s history – its operating margin rose to 13.5 percent. Quite clearly, these are impressive figures. But beyond all abstract notions of percentages and improving margins, allow me to share with you, the owners of Nestlé, the human and industrial reality behind this performance.

“As you know, one of our main strategic pillars and the origin of our company is infant nutrition. True, the farine lactee originally promoted for infant feeding by our founder Henri Nestlé is totally unsuitable for infant feeding by today’s standards, but then science was in its infancy. Now our formula is much improved, though still only a poor approximation to breastmilk, many ingredients of which have still to be discovered and understood, which cannot be synthesised or which act differently in the different environment of formula.

"Nestlé is not letting itself be distracted by these statistics, however. We continue to promote formula with idealising claims that suggest it is close to breastmilk or even superior. For example, claiming it contains ‘Brain Building Blocks’ even though we know a systematic review of research shows, and I quote: "At present there is little evidence from randomised trials of LCPUFA supplementation to support the hypothesis that LCPUFA supplementation confers a benefit for visual or general development of term infants". While that may be true we argue that LCPUFAs (long chain polyunsaturated fatty acids) are found in the retina and brain so what we say is literally true – they are brain building blocks, even if putting them into formula does not actually seem to do give any benefit.

“At the same time as making idealizing claims, we continue with strategies such as targeting mothers directly. This may be through baby clubs, which enables us to promote our brand name even before babies are born, or nutrition centres in supermarkets, a strategy we’ve employed in the growth market of China, where breastfeeding rates are beginning to fall. Not just due to promotion, of course, but also industrialisation. Nestlé argues that industrialisation and women entering the workforce will mean more mothers artificial feeding. This does require cultural change to undermine breastfeeding, unlike the Scandinavian model where working mothers are enabled to breastfeed.

“Nestlé does continue to target mothers more directly by distributing leaflets, free samples and free supplies. These practices are prohibited by the International Code of Marketing of Breastmilk Substitutes and subsequent, relevant Resolutions of the World Health Assembly and even Nestlé’s own weaker instructions. But we do have a strategy of either denying any reports or claiming it was due to flaws in our marketing practices. If we do say sorry from time to time when activists or authorities catch us bang to rights, we can actually suggest this shows we are ethical. But don’t worry, it is a big world and the vast majority of the violations are not recorded by these activists and not all countries have introduced independently monitored and enforced regulations, so there is still plenty of scope to break the rules and get away with it.

“Nestlé didn’t admit it at the time, but we have had to make some changes to policies due to campaigners. We resist as long as possible, however. In 1994 the World Health Assembly said that complementary feeding should be fostered from about 6 months, but we didn’t change our labels until 2003, carrying on promoting foods such as Cerelac form 4 months. Yes, yes, thank you for your applause. Those 9 years of delay were worth significant amounts for the company and in some countries, such as here in Switzerland, you can see we still manage to promote complementary foods from 4 months. If we can get mothers to introduce complementary foods early, then they are probably more likely to continue to use processed foods rather than family foods. As you know, our model for growth particularly involves the 4 months to 36 months age group, which is why we are so pleased to have taken over Gerber.

“There are still risks, of course, and as a responsible CEO I should keep you updated on these. In past years my predecessor, Mr. Brabeck, failed to mention these, though someone from Baby Milk Action did often attend these meetings to try to draw them to your attention. So let me be a bit more open and tell you what we are doing to neutralise the risks. One issue is the intrinsic contamination of powdered formula with pathogens such as Enterobacter Sakazakii. As you know infants have died after being fed contaminated formula, some of which has been linked back to our factories. We have even had to organise mass recalls of batches of formula, but we do try to limit such recalls. So in 2003 when we had to recall Beba formula we did so in the European Union, but did not in Switzerland, which is outside the juridstiction of the European Food Standards Agency.

“Campaigners and health advocates have won support for action from the World Health Assembly in Resolution 58.32 adopted in 2005, following a study, and I quote: “the joint FAO/WHO expert meeting on Enterobacter sakazakii and other microorganisms in powdered infant formula held in 2004 concluded that intrinsic contamination of powdered infant formula with E. sakazakii and Salmonella had been a cause of infection and illness, including severe disease in infants, particularly preterm, low birth-weight or immunocompromised infants, and could lead to serious developmental sequelae and death;”

“I know that sounds serious and there are moves for improved warnings on labels at the Codex Alimentarius Commission. But the Nestlé board is wise to the risks and the company is working to stop or weaken any warnings that may cause parents to question the quality of our products. Certainly we are not going to voluntarily warn parents that powdered infant formula is not sterile. As with the change in labelling of complementary foods, we will resist for as long as we can.

“There do continue to be governments introducing the Code and Resolutions into legislation. Again Nestlé is alert to the risks of controls on our marketing practices and actively works to undermine such legislation in favour of voluntary codes, which can be flouted, or to weaken regulations. Where possible we try to place Nestlé people on the bodies responsible for overseeing legislation, which gives us the best of both worlds. We can claim to support legislation while making sure our materials are approved.

“As you know my predecessor, Mr. Brabeck, frequently dismissed talk of a boycott of Nestlé, by suggesting it was limited to activists in the UK. Or Sweden. Well, I have to admit that according to an independent survey conducted by GMIPoll Nestlé is one of the four most boycotted companies on the planet. Now, we can argue that it is simply because we are big and visible. Privately at least Nestlé should perhaps at least acknowledge it shows the strength of the campaign to expose our malpractice and the risk of continued violations. However, at this stage the board is refusing to accept the four-point plan put by boycott organisers for saving infant lives and ultimately ending the boycott. Nestlé exists in a competitive world and the boycott is simply another factor to be taken into account. As long as we continue to grow and boost shareholder value we can limit the changes we are forced to make as much as possible. At the same time, Nestlé tries to label campaigners as inaccurate, ill-informed, counter-productive, unwilling to dialogue etc. etc. It is true Nestlé has been invited to set out its terms and conditions for participating in an independent, expert tribunal where witnesses could be called to get to the bottom of the issues, but that is not in our interests. Why would Nestlé want the truth to be known? It can only be counter productive to company profits, so we are refusing to even discuss terms and conditions. If many other organisations back the call for the tribunal, we may have to reconsider. But remember, despite welcoming a public hearing at the European Parliament at the shareholder meeting in 2000, in the end we still refused to attend. So Nestlé will be as obstructive to the process as we can.

“Mr. Brabeck’s other strategy, of course, has been to suggest the malpractice was in the past and Nestlé has since changed. Nestlé, can, of course, keep updating this strategy. Generally we say it was an issue in the 1970s. But when Baby Milk Action won a case before the UK Advertising Standards Authority in 1999, we claimed one of the practices we had been caught out over – giving free supplies – ended in the 1990s. Some of the things they and their colleagues exposed in their 2004 monitoring we can now say were due to flaws in our marketing practices and these have been corrected. The beauty of this strategy is it makes us look responsible and accepting of criticism while continuing to roll out similar promotions.

“One thing you will notice, however, is that Nestlé never apologises. The strategy is to admit to mistakes in the past, but to say they were isolated errors or standard practices for the time. If we apologised for the impact on parents and infants we could make ourselves liable for compensation claims.

“On a final note, Baby Milk Action wrote recently about Nestlé’s expansion in the dairy industry in Pakistan. They cited other countries where Nestlé had become a monopoly buyer of milk then squeezed suppliers while increasing prices to consumers. At the 2007 shareholder meeting, Mr. Brabeck made special mention of the training we give to women on animal husbandry. I would like to balance this with some other news. Nestlé Pakistan is taking authorities to court in Pakistan to challenge their right to fix the prices of milk. Nestlé is arguing it should be excluded from the process of price determination on the grounds that milk in tetra packs and milk powder are not an essential commodity. Now, as Baby Milk Action pointed out, producers of processed milk are trying to undermine confidence in fresh milk through a mass media campaign and in other countries we have successfully changed the culture from fresh milk to packaged milk. So in the future our milk will be an essential commodity and shareholders will see the benefit of Nestlé challenging the price caps on milk at this stage. Just to reiterate what Mr. Brabeck has said about our involvement in low-income communities: ‘These are profitable activities: this is not charity, but a long-term business opportunity that is justified by the returns generated.’ Thank you once more for your applause.

“Now if thee are no questions, lets all go and have a Nescafé and a Kit Kat next door. At least those of you shareholders who are not supporting the boycott”

---End of the fantasy of a more rounded presentation from the Nestlé Chief Executive

It's not going to happen is it? So it falls to well-informed shareholders raising these issues. And you only need one share to be a shareholder.

If you would like to attend the shareholder meeting all you need is a registered share.

So do you have any Nestlé shares? If you do already – perhaps you represent an institutional investor – then please contact Baby Milk Action so we can provide a briefing on our concerns about Nestlé and put you in contact with other organisations who have researched its activities in other areas. It is impossible to for shareholders to change Nestlé practices at the AGM, but you can speak out or at least applaud those who do at future meetings.

If you would like to attend the meeting as an individual then you can buy one share yourself (we do not encourage people to buy more than the minimum required – why would you want to profit from Nestlé malpractice?)

Shares are of the order of £200 (currently quoted on the Nestlé website at CHF481.75).

If you buy through a UK broker, please discuss this carefully. Nestlé refused to register a share I had bought to attend the meeting. The broker I had used found this highly unusual.

---Quote beginsNestlé shareholders also agreed to special quorums requiring the presence of up to two thirds of the total share capital and supermajorities for certain decisions, including changes to voting restrictions or the terms of the members of the board, etc. In the meantime, Swiss law has been amended and provides greater transparency and protection in a takeover situation.

Also, today, more than a third of shareholders have elected to hold "dispo" shares and notto be registered with us. They voluntarily forego their voting rights. The Company's highest authority, the Annual General Meeting, thus finds itself factually unable to achieve the participation required by these quorum clauses and therefore cannot change the Articles of Association in several key points.---quote ends

---Quote beginsDispo shares in Swiss parlance are shares purchased through the banking system for which the beneficial owner has not filed a request for registration as a shareholder to the company. These shares do not vote at all, but they play a role for issues of quorum.---quote ends

Normally, I understand, the bank holding the shares can issue a letter confirming that the share has been allocated to the person who has purchased it so it can be registered with the company. That is what my broker said they usually do and provided me with the letter. However, Nestlé refused to accept this letter when I presented it. I had a share. I could prove I had a share. But Nestlé would not register it. How many of those who Nestlé claims 'voluntarily forego their voting rights' are in the same situation?

So please check before spending any money. If you are a UK expert in this area, please do contact us.

If you do not wish to attend the shareholder meeting yourself, but would like to help us bring people from other countries to raise their concerns, then you can make a donation to Baby Milk Action. We have set up a special donation line for ‘Nestlé shareholder meeting action’. If you make your donation here, we will use the money to buy a minimum number of shares we can allocate to speakers and cover the costs of their attendance at the shareholder meeting.

If you do hold shares, you could also arrange to transfer some to us, which we can then allocate to speakers at future events.

It is a safe bet that Mr. Brabeck’s successor will not be making a presentation like the satirical - though totally factual - one given above. It falls to us to bring these points to the attention of shareholders.

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